Collins Belton, Managing Director of Brookwood Firm, said that hundreds of millions of dollars flowing into altcoins might escape regulatory bodies because of their inherent structure. He argued that “true” DeFi projects portray a different legal issue for lawmakers when compared to ICOs, due to the absence of security like tokens in DeFi space.
Belton says that regulators try to look at these two primary points before assessing any business/transactional activity. Primarily regulators first evaluate whether an identifiable organization could be held liable for a crime, and secondly, if the legal costs associated with the violations can be avoided. “They take selective action against visible targets with hopes of “making examples” and preemptively deterring future violations. This lets them “leverage up” so to speak,” said Belton.
Is Decentralization Answer to SEC’s DeFi problem?
Belton explains for the good or the bad, these issues are absent in DeFi projects, and therefore it makes them a challenging target, which is not the “regulators primary focus,” said Belton. He gives more clarity by referring to Yearn Finance, ‘the yield farming’ DeFi project, which is entirely governed by its community and thus has no single operator to catch hold of, legally speaking. What it means is that regulators can’t just sweep in if somehow a catastrophe occurs, affecting millions of dollars locked in liquidity pools.